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Israel Banking

“Why or why not should one be incorporated?” is the question American lawyer Don Kramer asked in his Weekly E-Newsletter back in 2010.

For Mr. Kramer, the question is a legal one. The pros and cons that he outlines deal with personal liability and procedural/substantive questions. His fantastically succinct answer refers to state statute and case law.

For some, incorporation is relevant not because of legal concerns but rather taxation benefits. Others might contemplate incorporation through the lense of fundraising and its effects on donors. And yet to others, the act of incorporation or registration is simply a question of time and money — lacking either of the two might automatically render incorporation as an unwarranted expense.

As a banker, and more specifically, as a banker that deals with international nonprofits, I’m interested in easing a charity’s ability to open and manage a bank account.

So like any good Jew, I’ll answer a question with a question. When seeking to solve the riddle of “Should I incorporate?” I ask the following: Will your charity operate internationally?

If the answer is yes, then incorporate. It will make banking a whole lot easier.

Israeli charities (amutot in Hebrew) rely on donations from overseas – no secret there. Many foreign-based charities choose to create an American based nonprofit, more commonly referred to as a “Friends of” organization so donations can be tax-deductible vis-a-vis the American Federal Government. (In a previous post, I spoke about IRS trends when a “Friends of Organization” is applying for tax-exempt status.)

However, it could be that establishing a “Friends of” organization is not in your charity’s best interest. The following are some considerations that elaborate on: Why not to raise funds through a U.S. registered “Friends of” Organization?

But, alas, in Israel the answer is no…kind of. Cryptic, but true. That is to say that in my experience as a banker, I have both ordered credit cards for charities that wanted them and canceled credit cards for charities that were told it was “illegal” to have them.

In a previous post, I mentioned that a loan and a line of credit serve the same purpose. While that may be true in a broad sense, they actually can be quite different. Hence, the different names. The bank will look at both types of credit the same way, evaluating the amount of credit requested against the amount and type of collateral offered. The customer, however, only cares about one thing, which option is cheaper.

It is logical to assume that if a bank wants to appeal to the nonprofit community then it has to understand the nonprofit organization’s way of thinking (that’s where I come in). The opposite should also be true. If a charitable institution wants to appeal to a bank then it must understand the bank’s way of thinking. This is especially the case when using or applying for credit from a bank.

I’ve Moved!

After 9 years in banking, I have decided it was time for my next challenge and have opened my own company that offers outsourced CFO services to local & international nonprofits and small businesses operating in Israel.

Visit my new site to discover how your organization can increase its efficiency and relieve stress by outsourcing critical financial tasks – either on an ongoing or per-project basis: Fogel CFO & Management Services